Software Licenses: The Battle Continues

Software Licenses: The Battle Continues

Article excerpt

For as long as there has been software, the publishers who own the software copyrights have routinely used licenses as the primary vehicle for distributing their software to consumers. After many years of this practice, consumers now recognize that when they purchase a copy of a software program, they are buying a license to use it and not actually buying the software itself.

Terms such as "shrink-wrap license" and "click-wrap license" are commonplace transactions. And it has become a sign of the times when the End-User License Agreement (EULA) has become about as well-known as many other four-letter words.

Consumers may not understand all the legal implications of licensing software versus actually owning it. But like many other consumer transactions, this has not prevented users from acquiring and using software. After all, consumers may enter into contracts and licenses daily without studying every term or condition of them. Of course, that does not make those terms or conditions invalid. If it did, commerce would come to an immediate halt. Instead, the relationship evolves into expectations: Businesses provide certain terms and conditions, and consumers expect those terms or conditions in their transactions (or know which terms and conditions may vary).

Washington Court's Surprising Decision

Unlike consumers, district court judges are responsible for understanding and recognizing the legal distinction between licensing and owning a copy of the software. When faced with this issue, judges usually get it right. But occasionally, a judge can stray off course. And that's just what happened on May 20, 2008, in the Vernor v. Autodesk case in Seattle.

In this case, a software publisher, Autodesk, chose to distribute its software only under licenses. Timothy Vernor, one of Autodesk's customers, licensed this software and agreed to its terms. The evidence showed that this was a considered decision by the customer. But the district court judge, Richard Jones, disregarded the intent of Autodesk, its customer, and the legally binding license agreement they had signed. The judge held that the "circumstances" of the transaction made it "really a sale," made the customer and subsequent recipients of that copy of software (such as Vernor) the "owner" of the copy, and declared Vernor was immune from Autodesk's copyright infringement lawsuits. The decision, though presently not binding in any other court, has been publicized widely and criticized heavily.

Indeed, several years of consistent court decisions had seemingly settled the issue of a license "as a license," not a sale. Now the Vernor decision brought the issue of software licenses back to the forefront of consumer debates. Among consumers, the topic is controversial: Is a person who obtains a copy of "licensed" software actually the "owner" of that software for purposes of deciding liability under the Copyright Act of 1976?

Arizona Court Repudiates Vernor Holding

After the Vernor decision, another federal district court declined to follow the reasoning in Vernor. Instead, the court treated the software transaction as a license, not a sale. The decision in that case, Blizzard v. MDY, was issued July 14, 2008.

Judge David Campbell of the U.S. District Court for the District of Arizona ruled that MDY Industries and its founder Michael Donnelly were contributorily and vicariously liable for infringing the copyrights of Blizzard Entertainment and Vivendi Games, Inc. (which we'll refer to as Blizzard). MDY created a software program called WowGlider (referred to as Glider) to play Blizzard's World of Warcraft (WoW) video game for WoW users while the user is away from his or her computer. Users liked the Glider program because it allowed them to accumulate points and, in essence, made their game characters stronger without actually having to play the game. There were several important issues at stake in the case, but perhaps the most significant issue to software publishers and users was if the court would give the software license its effect as a license rather than treat users as the "owners" of their software, as the Vernor court did. …